COMMENTARY: What the U.S. Patent Reform Bill Does and Doesn't Do

The courts and common patent practice did much of the heavy lifting before Congress made the law

14 September 2011—Have you ever had an argument that lasted so long you forgot what you were arguing over? In the patent reform battle, we may have lost sight of why reform was needed in the first place. The Leahy-Smith America Invents Act, to be signed into law this week, makes some seemingly sweeping changes, but a closer examination shows that the courts have already done much of the job for Congress.

The slow-motion legislative fight for a better patent system got a kick in the pants in June when President Barack Obama asked Congress to send him a ”bill that would make it easier for entrepreneurs to patent a new product or idea, because we can’t give innovators in other countries a big leg up when it comes to opening new businesses and creating new jobs.” Such legislation was not a new idea. The House of Representatives proposed a patent reform bill in 2005; the Senate did so in 2006. But for six years, the House and the Senate could not agree on whose bill should become law. Now, with the executive branch recasting patent reform as a ”jobs creation bill,” Congress finally has its act together.

In order to understand what the bill does and does not do, you have to take a look at the patent reform process up to this point. Patent reform was initially proposed to address concerns about the U.S. Patent and Trademark Office’s grant of flimsy—at times even silly—patents. Business-method patents were also targeted. In his introduction to the Senate version of a patent reform bill, Senator Orrin Hatch (R-Utah) referred to the infamous patent for the crustless sandwich. No one wants there to be a patent for peanut butter and jelly sandwiches, yet disagreements on the details of various reform bills kept them bottled up in committee year after year.

One thing is clear: Neither house of Congress was interested in making it easier to obtain patents. If that had been the goal, they could have lowered the fees the government charges for them, increased the number of patent office employees to reduce the application backlog, and lowered the standard for patentability. But in the bill to be signed by President Obama this week, some of the user fees charged by the patent office will go up, and new provisions regarding post-patent grant procedures will likely increase the cost and difficulty of obtaining some patents.

If the patent office could keep the fees it charges, it could hire more examiners and reduce the backlog of patents pending. Theoretically, patent quality would also improve. That provision, however, was lost in the fight between the House and Senate versions of the bill. So patent fees can still go into more general government coffers if Congress deems it necessary.

The most interesting components of patent reform actually have little to do with the relative ease of obtaining a patent. The more compelling change is from the first-to-invent system we use in the United States to a first-to-file system, which is used internationally and proposed in both bills. Various inventor and small-business groups oppose such a change, believing that it will put them at a disadvantage in relation to large corporations with the means to file quickly. But proponents say that fights over who invented something first are costly and that it would be easier if we, like the rest of the world, just granted the patent to the first applicant.

It’s true that an ”interference”—the proceeding in which the patent office decides which of two applicants was the first to invent something, and thus the winner of a patent—is both expensive and time consuming. But interferences don’t happen very often (for less than one-tenth of 1 percent of the half million patent applications filed each year), and in the vast majority of cases, the first filer wins anyway, leading some commentators to quip that we already have a de facto first-to-file system. Maybe that’s why patent reform has languished—it seems to propose solutions to problems we don’t really have.

Also, since 2005, while Congress has debated patent reform, the courts have corrected several real problems from the 1952 Patent Act. For example, they have already imposed severe limits on patent marking ”trolls”—plaintiffs who sue companies for outdated or incorrect patent number markings on their products—so legislating against such trolls may no longer be necessary. The courts have also addressed the standard for patentability, injunctions, and determining damage awards in patent cases, so in some sense patent reform has already happened.

In the main, a strong patent system can drive an economy. Obama and congressional leaders would probably argue that it sets the foundation for economic growth and drives innovation by assuring inventors that they will reap the rewards of their own efforts and by making their inventions public. Let’s hope the new law helps the patent system do that.

The Courts Did Some Reforming Before Congress Stepped In

REFORM

CONGRESS

THE COURTS

First to File

Congress shifted the system from granting a patent to the first to invent something to the first to file a patent on the invention. But the United States may already be a de facto first-to-file system.

The activity of plaintiffs who sue companies for outdated or incorrect patent number markings on their products is curtailed by the new bill.

Some restrictions were in place before Congress acted.

Damage awards

Courts made it harder to obtain increased (triple) damages.

Injunctions

Injunctions are now harder to obtain, especially if the patent in question is owned by a troll.

Patentability standards

The bar is now higher for what is patentable.

Post-grant review

Congress came up with two new ways to take a second look at a patent.

Inequitable conduct

The law provides a new way to cure a problem with a patent.

Courts have made it harder to get a patent invalidated by alleging that someone misled the patent office.

About the Author

Kirk Teska is an adjunct law professor at Suffolk University Law School and is the managing partner of Iandiorio Teska & Coleman, an intellectual property law firm in Waltham, Mass. His latest book, Patent Project Management (ASME Press), is now available.